How Does a ‘Perpetual Swap’ Differ from a Traditional Futures Contract?

A traditional futures contract has a fixed expiration date, and the price converges with the spot price at that date. A perpetual swap, however, has no expiration date, allowing a trader to hold the position indefinitely.

To keep the perpetual swap price anchored to the spot price, a 'funding rate' mechanism is used. This rate is paid between the long and short positions, incentivizing traders to balance the contract price with the underlying asset's spot price.